The Student Debt Juggernaut

More and more college graduates seem to be talking about the same thing.  How am I going to pay off my college loans?  We have created a student debt juggernaut that is overwhelming.  According to Student Loan Hero, a website that tracks the student debt statistics, just last year the average student debt of a graduate rose 6% to a new all-time high of $37,171.00.  Nationally, the student debt load rose to 1.4 trillion dollars.  That’s greater than what Americans owe for car loans and credit card debt.  In fact, this issue is so great that it was in the national spotlight during the campaign season last year, with both democrats and republicans seeking to resolve the issue.  If we are not careful, the student debt juggernaut will keep growing and cause many college students to stumble for years after their graduation.  What is the solution?

Student Debt: The Governmental Solution

Student debt has become so large that both republicans and democrats have taken notice.  And, although their solutions are quite different, even their acknowledgement of the problem should cause us to take notice.  President Trump, on the campaign trail, proposed revising the federal loan forgiveness program.  His idea was to shorten the length of the debt forgiveness program by making the minimum payments higher.  But many believe that this would only create a greater rate of default.  The current rate of delinquency and default looms around 11.2%.

Other governmental solutions include: eliminating PLUS loans and privatizing all student loans, using federal loans to refinance private loans, or even using some form of employer contribution system.  No one is turning a blind eye to the situation, however, no solution seems to be within reach.  The only prediction…greater student debt.

Student Debt: Good Financial Planning

Even though there are many who graduate college with a load of student debt, there is another alternative.  But this alternative is not for the timid.  It takes hard work and sacrifice.   It is possible to put a plan together that will allow you to get a college education and not incur a mountain of student debt.  Not many people plan enough for their college years simply because loans have become so readily available.  Again, you can create a college financial plan that will meet your needs.

Do you have a good financial plan for the college years?  The best plans start when the future college student is still in preschool.  But there is no bad time to start planning.  These plans should include both financial planning and college preparation.  Start a plan today.  If you need help designing a good plan, contact us!

 

College Finances: Words of Confusion!

Have you ever watched the Presidential Press Secretary giving a press briefing?  It is quite amazing.  No matter your political affiliation or lack of affiliation, if you watch the press secretary during a briefing, you can see that there is as much not being said as there is being said.  There is a delicate dance of words happening.  Of course there are many things that they can’t say, there are some things they need to say, and there is the delicate ground in between that often leads to confusion.  This delicate dance of words is found in many areas of life.   So it should not surprise you if it is found in college finances.  Here are a few of those college “Words of confusion” that need greater clarification.

Words of Confusion: Cost of Attendance (COA)

The COA is one of the most important figures to know with planning for college.  You can research online to find the expected COA of any college.   You will also find the COA in your financial award letter.  The confusing part of the COA is just what is included in this calculation.  For instance, there may be travel costs that can vary from location to location, and there are book costs can vary greatly depending upon the vendor one uses.   Even simple things such as living expenses and room set-up supplies all can make the COA a bit confusing.  It is important for you to have a great understanding of your specific COA in order to make proper financial decisions.

Words of Confusion: Expected Family Contribution (EFC)

Another common phrase that falls into the “Words of Confusion” category is the EFC.  There are many formularies available to figure out your family’s EFC.  What makes this confusing is that people believe that their EFC is the most they will have to pay for their yearly college expense.  This is not the case.  The EFC is actually the least you will have to pay for your yearly college expense.   A “need” may still exist between the COA and the EFC.  That leads to our final “Words of Confusion” phrase.

Words of Confusion: Financial Need

Let’s define the financial need.  Simply stated, the financial need is the COA minus the EFC.  Let’s say the college you want to attend has a COA of  $35,000.00, and your EFC is $17,000.00.  This would leave you with a financial need of $18,000.00.  Simple right!  Colleges want to make sure each student can attend their college,  so they strive to meet as much of this need as possible through scholarships, grants and loans .  The family and student will find this in their financial award letters.  But a growing trend in college is to say that they meet 100% of the financial need.  And herein lies the confusion.

In a recent US News and World Report article, Farran Powel, notes:

“Financial awards from colleges and universities use a combination of loans, scholarships, grants and work-study to cover the gap between the total cost of attendance and the amount a family is expected to pay. A school that claims to meet 100 percent covers the gap entirely.”

In fact they go on to list a number of colleges meeting the entire financial need in this way.  This may sound simple, but “meeting the need” by a loan is really confusing.  A loan will have to be paid by the student and/or parent.  This loan may be a federal loan, PLUS Loan, or even a state loan.  This is a delicate dance of words that you need to understand in order to craft a better financial plan for your college needs.

These words can be confusing, but they are important to understand before you make a financial plan.  The student and parent will need to look over each part of the financial award letter to see just how your financial need is being met.

 

 

 

Student Loans 101: CHESLA

College financial planning is more important than ever.  In a 2016 interview, one parent made the comment that it is “impossible to pay for college without some kind of help”.  This is becoming more and more of a reality for every potential college student.  In fact, finances are becoming the number one reason students attend a particular college.  Because of this immense financial pressure, more and more people are turning to student loans to fill the gap between their college funds and their college needs.  But not all student loans are created equally.

Student loans are not our preferred way to take care of the soaring cost of a college education.  However, we do feel it important to offer some guidance for those who may be searching for college loans.  In particular, we want to highlight Connecticut’s state option for student loans, the Connecticut Higher Education Supplemental Loan Authority (CHESLA)

What is the CHELSA?

CHESLA says its vision is to “serve as Connecticut’s leading resource for students as they plan for their college education.”  They continue by stating that they want to “encourage interest in higher education to help the State meet its workforce needs; and enhance economic development through innovative higher education programs.”  As one person said, “It’s Connecticut money for Connecticut students.”  But their mission is greater than just providing student loans.  In their own words, their desire is to “expand higher educational opportunities and enhance the State’s economic development through higher education.”  This is a great offering to those who live in Connecticut.  If you do not live in CT, it would be worth your while to see if your state offers a state sponsored funding option for your student.

Using CHESLA to Pay for college

You can find CHESLA’s loan details on their official website at www.chelsa.org.  But here are a few of the items that make this such a good offering.

  • No application fees
  • Low, simple interest
  • Payment deferral program
  • Borrow up to 100% of your college need
  • No prepayment fee

If you have done any research on student loans, these features are in line with other offerings.  But, what sets the CHESLA apart is that the interest rate is “4.95% Fixed Annual Rate (non-tiered, simple interest)”.  This is almost 2 percentage points lower than most student loan offerings available.  We think the CHESLA is an option that every one should investigate.  It may not be good for your particular financial needs, but then again, you won’t know until you investigate.

Using CHESLA to Refinance current student loans

Recently the CHESLA also became available as a refinancing option.  Starting June 2016, students could apply for the CHESLA refinancing program.   This program offers many of the best benefits of the original CHELSA program.  Again, this option may not be the best option for your specific financial needs, but it is a good offering for you to investigate.

I must restate, that it is never the best idea to use debt as a way to pay for one’s education.  However, if you must take out student loans, make sure you do a little investigating.  Student loans can have many pitfalls, but for some, they are a viable tool available to secure college funding.  One such pitfall about the CHESLA, that is a little hard to find, is that “interest-only payments are required while in school and the repayment period.”  While this was not listed directly on the CHESLA website, it is mentioned on another website regarding CT’s 529 plan called Connecticut’s Higher Education Trust (CHET).  Before you sign any student loans, make sure you have a solution that fits your specific college needs.

Finding College Funds: Investigate State Aid

Finding funds for college is one of the most daunting tasks associated with college financial planning.  Most people start with an internet search for scholarships.  For many, this “simple” search turns out to be not so “simple”.  Not only is it not so simple, but it can be dangerous, as there are many scams to avoid.  However, if you do not search, you will not find.  So today, let’s go on a hunt to find college aid funds.  And let’s be specific in our hunt and investigate state aid.

Now remember there are only two forms of aid, gift aid and self-help aid.  For more information on those types of aid, see our post regarding understanding your award letter.  We are going to do this together.  So go ahead and open up your favorite internet browser to your favorite search engine and let’s get started.

State Aid Search

You can start by doing a simple search of the words, “State college aid”.  Search results will vary among search engines, but my search found 8 million results.  Don’t worry, you won’t have to look at all of them.  For a more specific search, insert your state’s name.  For me that would read, “college aid for Connecticut”.  This time, my search found 19 million results.

On the first page of my result, I see a site that was on both my searches.  So, I am going to open it first.  The site is collegescholarships.org.  This is in no way an endorsement of this website, but rather, just a way to show you what I have found.

State Aid: Gift Aid

On this site, I discovered that there were many gift aid options available.  Remember, gift aid is aid that does not have to be paid back.  We usually refer to this kind of aid as scholarships or grants.  For my state, there are a few options available, but they all carry some kind of restrictions.  There is aid available for veterans; aid available for senior citizens; aid available to those who will be attending an in-state college.  There are even some career specific offerings.  Some of these offerings are tied to individual need, and some are not.  If any of these state aid offerings apply to you, make a note and read the specifics.  Make sure you make note of any deadlines for filing.  When it comes to receiving gift aid, there is always some work to be done, but receiving the aid will be well worth the effort.

State Aid: Self-help Aid.

I also found some self-help aid information on this site.  It appears that my state offers a really competitive loan option.  I need to make a mental note to investigate this further to see if it will be a good option once all other options have been exhausted.

I would not settle to just investigate one site from our search result, but what you will find is that after a few sites the information will all seem the same.  That’s because your state’s aid is the same no matter what site you view.  It is just packaged a little different.  By spending a little time searching, you could save a few thousand dollars in college costs.

Be sure to let us know in the comments section what you have found in you state aid search, or what other sites you may have found beneficial.

 

College Students and Taxes: Student Tax 411

Tax season is upon us.  While most students don’t really pay a lot of taxes, you need to know that tax season is just as important to students as it is to parents.  Let’s examine some important tax preparations that could benefit both students and families, and give you some Student Tax 411.

Student Tax 411: Gather Financial information

The First part of every tax preparation season is gathering your financial information.  There are certain things that both students and families will need before they are ready to prepare their tax returns.  There are the normal forms that disclose your incomes (W2’s, 1099’s, etc.)  But for the college Student, they will also need their 1098-T.  This identifies what you have paid for tuition over the last year.  It also identifies the student as a full time student.  This will be important as there are many tax advantages that are available once a full time student has been identified.  You should have already received this document, but if you have not, you will need to notify your school(s) or log-in to your school financial portal to secure them.

Student Tax 411: File Your Taxes

The big question on students mind is, “Do I need to file a tax return?”  This is a common question, and the simple answer is yes.  There are some benefits to filling you tax return.  One benefit is that you should receive a refund for any taxes you paid from your past years’ work.  A resource worth investigating is the Student Income Tax Return Guide from Efile.com.  They offer some valuable information on why you should file taxes every year.

For parents, filing taxes is a non-negotiable.  It’s the law!  And it is especially important during these college years.  The information needed to file the FAFSA will be readily available on your tax returns.  In fact, the FAFSA has a retrieval tool that will auto-populate much of your information directly from your federally filed tax return.  So file your taxes by April 15th and you will be ready to fill out the FAFSA in October.

Student Tax 411: Understand Tax Advantages

Two of the largest tax advantages for college students and their families are the The American Opportunity Credit (formerly The Hope Credit) and the The Lifetime Learning Credit.  These two tax credits can be very beneficial in your college financial planning.  Not every one will receive the same benefit, but they are worth the time to investigate.

The American Opportunity Credit: 

The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.” (1)  This tax credit offers a benefit of up to $2500.00.  If you have no tax liability, up to $1000.00 can be refunded to you.  This credit is only available for the first four years of undergraduate college expenses.

The Lifetime Learning Credit:

This tax credit offers a benefit up to $2000.00.  Here is how the IRS website states the possible benefit.  “For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students.” (2)  The benefit of the Lifetime Learning Credit is that there is “no limit on the number of years the lifetime learning credit can be claimed for each student.” (3)  There are various restrictions pertaining to who can and can not receive this credit, so you may want to speak with your tax professional or find more information online.

Student Tax 411: Update your FAFSA

Tax preparation is so important to updating your FAFSA.  In fact, once your taxes are filed, you can use the “Data Retrieval Tool” to import vital financial information from your filed taxes right into the FAFSA application.  This will save you vital time and correct some of the most common errors on the FAFSA.

While tax season may be a frustrating time, it is also a valuable time for college financial preparation.  A little preparation now, will benefit you greatly later.  So take time to prepare your taxes knowing you have the Student Tax 411 and that there is a benefit to your college planning needs.

 

(1) https://www.irs.gov/individuals/aotc 
(2) https://www.irs.gov/publications/p970/ch03.html
(3) https://www.irs.gov/publications/p970/ch03.html

 

College Decision Day: Where will you attend?

You have researched colleges, visited campuses, applied and been accepted, evaluated your award letter, and now it’s time to make your final choice.  May 1st is the date that most colleges would like you decision and deposit, but you are free to make the decision earlier if you would like.  You have worked hard to get to this moment.  What will your college decision be?  Here are some final thoughts to consider as you make this most important decision.

College Decision Day: Show me the college
College Decision campus visit

By now you have probably visited the college at least once, but you may want to take a more leisurely visit before your final decision.  Take a stroll around the campus, have a picnic on the quad, take some time to experience the campus and college life.  Sometimes, when you go for a scheduled visit you are too busy with your itinerary to slow down and really experience what the normal routine may be.  Try to image what a normal day of college life might be for you at that particular college or university.  You can learn a lot by slowing down and observing.

College Decision Day: Show me the money

Whether you like it or not, college is a financial decision.  So take a moment to look through the financials.  You may even want to schedule a family discussion about college plans.  This is a great time to make a college spending plan.  There is also still time to apply for some scholarships.  You may want to check your employers, local service organization, an other community involvement agencies.  Do as much work as you can now to help your financial picture for your first year of college.

College Decision Day: Make the Decision

Once you are confident in your decision, you need to submit your deposit and any final paperwork necessary.  Most students show their decision by wearing a T-shirt proudly declaring their college decision.  It’s a time of celebration….a right of passage of sorts.  The high school years will soon be over, and a whole new door of opportunity awaits!

So celebrate your decision now, for classes will begin sooner than you think!

 

 

The Value of College Mentors

Mentoring is a term that is often used in the college arena.  “Mentorship is a relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person.”(1)  There is great value in college mentors.  But what kinds of college mentors are most beneficial to your college needs?

College Mentors: College Life

Many colleges are aware of the need for incoming freshman to be connected with an existing student for the purpose of adjusting to college life.  This mentoring relationship provides a vital support for new college students.  As the University of Texas Dallas mentoring program explains, “The mentors in the program are successful undergraduates prepared to engage freshmen in campus activities and refer them to resources that can help them achieve their academic and personal goals.”  The needs of every student is different, so by having an individual college mentor you are setting yourself up for success.

College Mentors: Academic

We sometimes think of academic college mentors as tutors.  But that limits the true value of an academic mentor.  Tutors are mentors, in that they guide the student in a specific subject.  However, an academic mentor is more wholistic in their approach.  They offer advice about class scheduling, particular professors, general study habits, etc.  While a student may need specific academic mentors, they may also need someone to help them adjust to college life.  Many colleges try to meet this need through freshman orientations and student services.  Don’t be afraid to use these services, as they may lead to greater success in your college endeavors.

College Mentors: Sports

Sports mentors have many different names.  These mentors are coaches, fitness trainers, personal trainers and other team members.  But their goals remain the same as any other college mentor.  Their purpose is to help the student athlete perform in peak effectiveness.  For the student athlete, much of their student life revolves around practice, training and athletic events.  Without the help of a sports mentor, many find themselves unable to balance their academic and sports schedule.

College Mentors: Financial

One of the most overlooked areas of college mentoring is the area of finances.  These mentors offer advice on a variety of subjects such as college budgeting, scholarship management, and debt counseling.  For many students, college is the first time they really  need to manage their own finances.  They may have very little money skills, which can lead to improper management and increased debt load.  Developing a college spending plan (a budget) and evaluating that plan from time to time can be very beneficial.  This is one of the many services that we provide families who partner with us for college planning.

As you can see, college mentors play a vital role in success during the college years.  However, many students do not know or choose not to use the resources available to them.  Make sure you connect with and utilize these services.  For more information about financial mentoring, contact our offices today.

 

 

(1) https://en.wikipedia.org/wiki/Mentorship

Appealing your College Award Letter

Many people open their college award letter and are excited about what the future holds.  But others look at their award letter and immediately feel the enormous pressure of financial burden.  However, your college award letter may not be the final offer from the college of your choice.  You may be able to appeal your award letter.  When you appeal your college award letter you are asking that specific college to consider additional circumstances that hinder your ability to pay for college.  In essence, you are asking them to adjust their initial award and offer you additional gift aid.  But not all appeal letters are written equally.  In fact, Time recently wrote an article about some of the “all too common” mistakes seen in appeal letters.  Here are a couple of questions to ask when drafting your appeal letter.

Appealing your College Award Letter:  When?

Appealing your college award letter may result in additional gift aid!

The question most often asked is when.  When should we appeal an award letter or under what circumstances should we appeal the award letter?  There are many good reason to appeal your award letter.  From time to time, there are special circumstances that may have changed one’s income in the previous year, or may affect one’s income in the current year.  These special circumstance would warrant an appeal.  Here is a list of some special circumstance that may occur:

  • Loss or decrease in income
  • High Medical Bills
  • One-time High income distribution
  • Divorce/ change in marital status
  • Loss of a parent

Along with tehese special circumstance that involve particular financial changes, there may be other special circumstances that can be made know.  There may be more than on family living in the home.  There may be more than on family members attending college at the same time.  You may even want to use an appeal letter to leverage one college’s financial offerings against another.

Appealing your College Award Letter:  How?

Most people appeal their college award in writing via email or fax.  Some go the extra step and hand delivering the letter.  However you choose to deliver your letter, here are a couple of tips to help your college appeal letter get more attention.

Be Specific!  You have been working with a specific advisor, so address the letter to their attention.  Give specific information regarding your special circumstances.  Be specific in what you are asking.  For instance, if you need an additional $3000.00, then ask specifically for that $3000.oo in gift aid.  If you ask for that amount, then you will need to be specific with your reasons why you need that amount.

Provide Documentation!  When you appeal your award letter make sure you provide ample documentation.  This may include financial documentation, copy of unexpected medical bills, etc.  Your documentation will give proof to your need.  Let the appeals team see exactly why you need additional financial consideration

Follow-up with a call!  Once you have submitted the appeal letter, follow-up with a phone call.  This will allow you to make sure the college has all the information you provided, and you can ask how long it will take to get an answer to your appeal.  A phone call will also afford the college the opportunity to ask any additional information they may need.

Appealing your College Award Letter:  Let us help!

Appealing your college award letter can gain you additional gift aid.  But you need to be careful.  You need to make sure you understand your award letter and understand the grounds for appealing your award letter.  You must also be able to articulate your need and provide documentation regarding your need.  A well written, well documentation appeal letter could save you thousands of dollars in college expenses.

One of the services included in our college packages is profession help in drafting your appeal letters.  Call our offices today to schedule a free college planning consultation and see how we can help you prepare for the college years and beyond!

 

Evaluating your College Award Letter

Once a student is accepted into a particular college, they should receive a college award letter around the beginning of April.  This award letter will be the first glimpse at the financial offerings from the colleges where you have been accepted.  But don’t worry, there may be some room for negotiation.  Once you receive this important letter and have a good understanding of what the letters says, you need to evaluate your college award letters.  Here are three tools for you to use while evaluating your college award letter.

Evaluating Your College Award Letter: College Data

The first tool you use when evaluating your college award letter is the college data available.  This may take a little investigating, but it could yield a significant amount of additional gift aid if you choose to appeal your award letter.  The type of information you are searching to find includes: the academic award scale, the average gift aid awarded by the particular college, percentage of need met, etc.  You are looking for the facts regarding what the average student receives in scholarships and grants.  So as much information as you can find will be beneficial.  Here are two very useful resources to check the college data: collegedata.com and collegeboard.org

Once you have gathered as much information as you can find, compare what you have found with what you have been offered.  Is your offering in line with what the average student will receive?  Are your scholarships on par with your peers?  Are there any scholarships or grants that you think you should have received?  When you find discrepancies in your award letter and the information you have found, you may have good grounds to appeal your award letter.

Evaluating Your College Award Letter: Leveraging Multiple College Award Letters

Most students do not apply to just one college.  In fact, if you are only applying to one college, this alone my be a reason to apply to a few more.  All you are doing here is looking at the college award letters from the colleges where you applied and seeing how they stack up against one another.  If one college gives a greater scholarship and grant package make a note of that.  But let’s say that the best awards are offered from your third college choice.  You  may be able to use one award letter as leverage to appeal.  This technique works best when the colleges are in direct competition for students.

Evaluating Your College Award Letter: Your Family Financial Situation

Finally, you need to evaluate your award letter in light of your family financial situation.  This is arguably the  most important evaluation.  How does the award letter work within you current financial picture?  Say for instance you have saved $35,0000.00 for your entire college expense.  Once you have evaluated your college award letter you find that your total cost of attendance is about $16,000.  You know that you have two years completely paid, but you also know that you have almost two years completely unpaid.  You will have to decide if you are willing to take out a loan to cover the cost or choose a more affordable college.  Each award letter will be different.  You will need to decide what is important to you.  This is why you need to evaluate each award letter in light of your financial situation.

Once you have evaluated your award letter, the next step will be to consider sending an appeal.  But as you can see, you are not ready to appeal until you have thoroughly evaluated your award letter.  One of the features that our company offers is an evaluation tool that will help in this process.  Call our offices to today if you are interested in learning more.

Understand Your College Award Letter

The college acceptance letter is one of the most joyous letters that a student can receive from their respective college.  But it is arguably not the most important letter. The College Award letter is always mentioned as one of the most important letters received by the aspiring scholar.  Why is it so important?  Simply stated, just because you have been accepted into the college of you dreams does not mean that you will be able to attend the college of your dreams.  The college award letter offers the first glimpse at whether of not you can afford the college you want to attend.  According to FinAid.org, “This letter spell out the details of you financial package.”  So before you make your final college decision, here are some truths you need to know to Understand Your College Award Letter

Understand Your College Award Letter: Know the Differences in Cost of Attendance.

The most important piece of information you need to find on the award letter is the cost of attendance (COA).  The COA may or may not be clearly stated on the award letter.  Even if it is stated it still may be a little different for every student.  It includes items such as: tuition, fees, room, board, books, transportation, and personal expenses.  Many colleges are including this in the award letter, but if it is not included, you will need to figure out this cost with a little research on the school’s financial aid web page.

Knowing the student’s COA is vital to understanding their award letter.  Once the student has figured out their total COA, they are ready to move to the next important part of the award letter which is understanding their college need.

Understand Your College Award Letter: Know the Difference between COA and need.

You now know the COA, but that is not the only number you need to know.  The second number you need to know is your need.  Your need is the COA minus your expected family contribution (EFC).  For instance, the college of your dreams COA is 32,000 and your EFC is 17,000.  Your college need is 15,000.  This is why we always say that the EFC is the “minimum” you can expect to pay for your annual college expense.  You will have to pay the EFC, plus some, if not all, of the need.  It is this need where colleges are often willing to offer some scholarships and grants.  More often than not, this need area is covered by college loans.

Understand Your College Award Letter: Know the Differences in Awards.

There are only two types of awards noted on the college award letter: gift aid and self-help aid.  The difference between the two types is that one has to be be paid back and the other does not.  You are probably more familiar with the words scholarships and grants.  The aid from grants and scholarships is gift aid.  They will not need to be paid back.  This aid may be granted for excellence in academics or sports.  But it can also be grants given by the university to the student for various other reasons.  The Pell Grant also falls into this category of aid.  This aid is usually awarded on the grounds of financial need.

But that is not the only kind of aid marked on the award letter.  There is also self-help aid.  This aid refers to loans and work study.  The federally funded Federal Direct loan (formerly known as Stafford loan) both subsidized and unsubsidized will need to be repaid.  Another form of loan that may or may not be listed on the award letter is the parent plus loan, which again will need to be repaid.

It is important to understand your college award letter and know what type of awards you will be receiving.  This will help you as you evaluate each college award letter and ultimately make the decision on which college to attend.  Soon you will be preparing for your first day of classes.